IDEAS home Printed from https://ideas.repec.org/p/trf/wpaper/347.html
   My bibliography  Save this paper

The Timing of Out-of-Court Settlements Revisited: Theory and Cross- Sectional Evidence from Texas since 1988

Author

Listed:
  • Zhou, Jun

Abstract

Legal institutions play an important role in affecting delay in settlement. But little research has investigated the institutional causes of delay. The empirical literature is ambiguous regarding the impact of trial-court delay on settlement delay. I analyze the timing of bargaining and the causes of delay using a cross-section of insurance claims in Texas over a 20-year span. I discuss a dynamic model of pretrial negotiation to illustrate how changes in the legal systems might affect the duration of settlement. Comparative statics results are then corroborated with empirical estimates of a hazard function adjusted to account for the heterogeneity of claims and the time dependence suggested by theory. Statistical tests are consistent with the theoretic prediction that delay in trial courts expedites out-of-court settlement. I also find that alternative dispute resolution, a legal process designed to save transaction costs, reduces the rapidity of settlement. Prejudgement interest, a law introduced to reduce delay, actually causes a greater delay in settlement. The results have implications for efficiency of the judicial system and reform efforts aiming to reduce delay.

Suggested Citation

  • Zhou, Jun, 2010. "The Timing of Out-of-Court Settlements Revisited: Theory and Cross- Sectional Evidence from Texas since 1988," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 347, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  • Handle: RePEc:trf:wpaper:347
    as

    Download full text from publisher

    File URL: https://epub.ub.uni-muenchen.de/13207/1/347_01.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Joni Hersch & Jeffrey O'Connell & W. Kip Viscusi, 2007. "An Empirical Assessment of Early Offer Reform for Medical Malpractice," The Journal of Legal Studies, University of Chicago Press, vol. 36(S2), pages 231-259, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    settlement delay; trial-court delay; prejudgment interest; alternative dispute resolution;

    JEL classification:

    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:trf:wpaper:347. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tamilla Benkelberg). General contact details of provider: http://edirc.repec.org/data/vfmunde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.